The China affair: what it means to us

A journalist recently called me to check if I thought that India had the same food-consumer product record as China. He wanted to know if we face the problems that are plaguing Chinese exports of late: tainted pet food, toxic toothpaste, lead-paint in toys, chemicals in textiles.

It got me thinking: of China and of India and more importantly, about the phenomena we call the market.

The fact is that the us and other parts of the rich world, which are today crying foul about Chinese toxic exports, should have known better. They should have known that they were in the business of buying cheap food and cheap consumer products, and that there was something rotten with this business. They should have been aware that goods produced in their country are expensive, partly, because they pay for pollution control, surveillance and enforcement of pollution regulations and for new technologies to get rid of newer and newer toxins.

So it is in the interest of the rich world to out-source production as it has to feed its ravenous appetite for everything. The economy of the rich world is built on the principle of consuming disposable products—new toys that come with each season or with each new hit movie, and processed food that breaks all pricelines. This madly consuming rich society needs cheap goods for its happiness and to make its economy profitable.

But these goods are cheap because the Chinese discount their environment in manufacturing them. In this market, ‘competitive advantage’ lies in not paying the price of environmental safety.

Then why are we surprised at the recent scandals that exposed toxins in Chinese products. This had to happen sooner than later. Think of the late 1980s, when the us was shocked to find that pesticides it had banned because of their toxicity were finding their way back into food in the country, through imports. These were the same pesticides that us industries had exported to developing countries, knowing full well that they were illegal and toxic.

The circle of poison was complete then, as it is now. The only difference is that this time the exports are not just of materials but of methods of production, which come with incessantly occurring costs to the environment.

There is no doubt in my mind that if India is to also become the favourite junk provider of the world—and we are desperate for that—then we will have to do the same. Our competitive advantage, even more than the Chinese who have money to invest in necessary energy and transport infrastructure as well as the power to fix their currency levels in this linked world, will lie in beating down our environmental regulations.

The only difference between us and the Chinese is our democracy—that is if we allow it to breathe. Whether Indian industry likes it or not, the internal pressure it gets from consumer and environmental interests is its safety valve. This pressure is forcing the Indian industry to produce quality food and meet environmental standards, not only for exports but also for sale in domestic markets. It is this, if anything, that distinguishes us from the Chinese, as I said to the journalist who called me. But this pressure will not be able to withstand the desperation to feed the desire for cheap goods in the rich world.

There is also no doubt in my mind that the western world has used environmental safeguards to its advantage—to keep out goods produced in the developing world by claiming that these are unsafe and do not meet stringent quality requirements. Over the years the green stick has been another name for trade protectionism.

But it is also clear that the Chinese and the Indians cannot win this game by playing it. It is a game of catch up: who invents the most deadly toxin wins the round. This game works when toxins are invented, used, and found to be deadly. But even as the inventor world stops their use, the toxins are exported to the emerging world—in the name of progress. Now, when the new world uses the same toxin, trade barriers are put up, this time in the name of consumer safety. Not only does the toxin change but even the amount at which a substance is considered a toxin changes. This requires expensive equipment to test the toxin at minute levels and even more expensive equipment to clean up.

In this game of catch-up, the only option is to invest in first producing dirt and then invest in cleaning it up or invest in phasing it out. After this, another chemical must be introduced—this is still not qualified to be a toxin but will soon become one. In this business, environmental protection is expensive and never-ending. In this green business, we cannot win.

It is for this reason that we must change the rules, if not the game itself. We cannot keep arguing that our trade advantage lies in undermining environmental safety. We must argue instead that the environment is our competitive advantage. It is our advantage only if we can learn not to discount it but to use it.

We must build our industry and agriculture by learning from the expensive mistakes made by the western world. We can beat them, not by playing their game of catch-up, but by reinventing our economic pathway. We can practice agriculture today without first using the toxins that need to be cleaned up later. This will mean reinventing the rules for organic and safe food production. We can produce cheaper goods by cutting out the unnecessary and expensive toxins that will need cleaning up tomorrow.

We can close this circle—not the circle of poison but of nectar. It is not just our choice, but our necessity. Let us be clear.